Housing paradox: All-cash sales rise as investor sales dip

The headline on Thursday’s release from the National Association of Realtors might sound contradictory.

“All-cash sales up while distressed sales and investors decline,” it reads.

Investors are often buyers in all-cash home sales. How can cash deals be up if investors are hanging back?

An explanation from NAR’s chief economist offers some insight into how much today’s in-recovery real estate market is driven by people with financial resources, whether savings, home equity or just good credit. At the same time, not-so-well-off Americans — such as first-time buyers — remain underrepresented due to a tight supply of homes for sale at the lower priced end of the market and credit restrictions.

First, here are the key statistics in the Realtors’ new data:

• All-cash purchases of homes were 33% of the market in the first quarter, compared with 31% in 2013 and 29% in 2012.
• Investors’ share of all buyers was 19% in the first quarter, the same as in 2013 but down from 20% in 2012.
• Sales of distressed homes — those are foreclosures and short sales — fell to 15%. That’s down from 17% in 2013 and 26% in 2012.  Investors snapped up these bargain-price homes by the thousands to turn into rentals the past several years.

Lawrence Yun, NAR’s chief economist, points out investors aren’t the only buyers who can afford to buy a home without taking out a loan.

Another group is aging Baby Boomers, who bought homes decades ago and now are trading down to smaller homes. They have decades of accumulated equity to reinvest in a home purchase.

A separate NAR study shows trade-down buyers rose to 29% of all buyers last year from 25% in 2012 and 23% in 2011.

Who else pays cash for homes? The majority of international buyers, Yun says.

It may be no coincidence then that in Florida, all-cash sales were more than half of all homes sold in January through March.

“Florida is the most popular state for international buyers, who generally pay cash, as well as vacation-home buyers who frequently pay cash. In addition, downsizing retirees are known to pay cash from the proceeds of their homes in the north,” Yun says.

Other states that stood out for all-cash sales in the first quarter were Nevada, Arizona and West Virginia, accounting for nearly four of 10 transactions, according to NAR.